The reported figure, which estimated that jobless claims had dropped to 292,000, about 31,000 fewer than the week before, seemingly suggested that the economy was finally entering a self-sustaining recovery on the back of a healing job market.

The number, however, is unreliable, the government said, skewed by upgrades on two state computer systems that caused those states to underreport claims. The total number of initial jobless claims is almost certainly higher than reported, though nobody knows the scope of the mismeasurement at this point.

The data malfunction has called into question the accuracy of a major leading indicator, one scrutinized by investors, economists and policy makers alike. It also shined a light on the imperfect and often outdated systems that states and the federal government use to provide benefits to workers and cull data on the labor market and the broader economy — a situation that some experts warn might become even worse because of the $1 trillion in budget cuts spread over 10 years known as sequestration.

The Labor Department would not confirm which two states had issues or guess as to the scope of the mismeasurement. But Nevada confirmed that it had not reported complete claims data to the federal government because of a computer upgrade.

“When we get data, we have an obligation to put it out there,” said Jason Kuruvilla of the Labor Department, explaining why the department did not wait rather than release incomplete data. He emphasized that the department did not recommend reading too much into any one week’s figure, at any rate.

“One week is not a trend,” he said. Mr. Kuruvilla said the two states that had misreported data would become more apparent after new state-level jobless claims data were released next week.

But some outside experts had scathing words for the Labor Department, and others described the data problem as not a one-time issue but a symptom of a chronic lack of money for one of the most critical functions of the government.

Rick McHugh of the National Employment Law Project, a nonprofit group in Washington, noted that unemployment insurance programs are partly financed by the federal government but administered by the states.

“This is a symptom of a longstanding problem with the unemployment insurance programs,” Mr. McHugh said. “These are state agencies, but they’re funded by federal dollars. And governors don’t see them as their agencies. They’re orphans.”

Many state unemployment agencies have struggled to keep up with the demands of their rapidly expanding and changing rolls through the recession and the tepid recovery.

Sequestration has only made matters worse, as benefit cuts this year for the long-term unemployed required state to retool their systems.

Nevada has struggled to carry out the across-the-board 5 percent cut to a federally financed program for the long-term jobless. States that put the cut in place partway through the fiscal year, which ends on Sept. 30, trimmed many recipients’ benefit checks about 11 percent. Nevada, which cut its checks only recently, did so by nearly 60 percent.

Problems with the computer system caused the mixup in reporting, said Mae Worthey, a public information officer with the Nevada government. “It wasn’t a glitch,” she said. “It was just implementing a new system.”

Economists said the reporting problems made it harder for experts and officials to keep track of the economy. That is especially critical now, as the Federal Reserve prepares for a crucial policy meeting next week.

“Officials should be completely transparent when they know that bureaucratic issues are distorting their data,” wrote Justin Wolfers of the Brookings Institution. “Such transparency would allow economists to provide simple statistical fixes, making the data more reliable and useful.”

While inflation remains benign, the increase last month should help ease worries among some Fed officials that price pressures in the economy were too low.

“Inflation is carving out a bottom. We are likely to see inflation tick up slightly in the second half of this year,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The modest acceleration is welcome news for the Fed.”

The Labor Department said on Tuesday its Consumer Price Index increased 0.5 percent, the largest gain since February, after nudging up 0.1 percent in May.

A 6.3 percent surge in gasoline prices accounted for about two thirds of the increase.

In the 12 months through June, the CPI advanced 1.8 percent, an acceleration from the 1.4 percent logged in the period through May and the largest increase since February.

Stripping out energy and food, consumer prices increased 0.2 percent for a second straight month.

That took the increase over the past 12 months to 1.6 percent, the smallest rise since June 2011. The core CPI had gained 1.7 percent in May.

Although both inflation measures remain below the Federal Reserve’s 2 percent target, the report showed signs of fading disinflation pressures, with medical care costs increasing after being subdued for the past two months.

Prices for new motor vehicles, apparel and household furnishings also rose.

The signs of stabilization offered by the monthly core measure fit in with Fed Chairman Ben Bernanke’s assessment that a downward drift in the inflation rate was temporary.

Bernanke said last month the central bank would likely later this year start cutting back the $85 billion in bonds it is purchasing each month to keep borrowing costs low. Economists expect the Fed to begin reducing the amount in September.

“The lack of further slowing in core inflation on a monthly basis in the last two months helps keep Fed tapering on track,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

BETTER GROWTH PROSPECTS

While the year-on-year core CPI rate could slip further in coming months, it should reverse course as economic growth accelerates over the last half of the year, economists said.

They expect a drop in unemployment to boost wage growth.

That optimism about the economy’s prospects was bolstered by a separate report from the Fed showing output at the nation’s factories, mines and utilities rose 0.3 percent in June after a flat reading in May.

The increase reflected a 0.3 percent rise in manufacturing output. Economists said it suggested some pickup in economic activity at the end of the second quarter. Growth in the April-June period is forecast at an annual pace of between 0.5 percent and 1.0 percent, far below the first-quarter’s 1.8 percent rate.

“If manufacturing growth is on the verge of accelerating into the second half of the year, this, along with solid gains in housing, should support growth in the second half of 2013,” said John Ryding, chief economist at RDQ Economics in New York.

Another report on Tuesday showed confidence among single-family home builders soared to a 7-1/2 year high in July, amid expectations of stronger sales and buyer traffic.

U.S. financial markets were little moved by the data as investors awaited testimony Bernanke is set to deliver to Congress on the economy on Wednesday.

Tepid growth has kept a lid on inflation pressures, but some pockets of pricing power are starting to emerge.

Last month, owners’ equivalent rent, which accounts for about a third of the core CPI, increased 0.2 percent after a similar gain in May. Apparel prices recorded their largest increase in nearly two years, while new motor vehicle prices rose after being flat in May.

Medical care services rose 0.4 percent, the largest increase in a year. Medical care, which makes up about 10 percent of the core CPI, had been subdued in April and May. The cost of medical care commodities rebounded 0.5 percent, reversing the prior month’s decline, as the price of prescription drugs increased.

Tame medical care costs have been one of the key contributors to the low inflation rate over the past months.

Economists cite a host of reasons for the lack of pressure on health care costs, ranging from the expiration of patents on several popular prescription drugs to government spending cuts that have cut payments to doctors and hospitals for Medicare.

“We think the impact of these transitions has started to fade away and we expect that drug price inflation may start to pick up over the months ahead,” said Ryan Wang, a U.S. economist at HSBC in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)

Imports fell 2.8 percent, to $223.1 billion, led by a 4.4 percent drop in foreign petroleum. Crude oil imports averaged just seven million barrels a day, the lowest since March 1996.

A smaller trade gap can increase overall economic growth as American companies earn more from overseas sales while American consumers and businesses spend less on foreign products.

For the first three months of this year, the trade deficit is running at an annual rate of $507.7 billion, 5.9 percent below last year’s deficit of $539.5 billion. Economists are looking for the deficit to narrow slightly this year, in part because they expect continued gains in American exports.

Analysts said the lower-than-expected deficit in March will most likely give a slight boost to overall economic growth for the January-March quarter. The government’s first estimate put economic growth at 2.5 percent in the first quarter but some analysts said that could be revised up to perhaps 2.7 percent because of the lower trade deficit in March.

The politically vulnerable deficit with China shrank 23.6 percent in March, to $17.9 billion, still far above the imbalance with any other country.

Separately, the Labor Department reported Thursday that the productivity of American workers barely grew from January through March after shrinking in the final three months of 2012. Weak productivity growth could prompt employers to hire more if consumers and businesses continue to increase spending.

Worker productivity rose at a seasonally adjusted annual rate of 0.7 percent in the first quarter, after shrinking 1.7 percent in the previous quarter.

American employers increased their payrolls by 88,000 last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected.

It also was the start of a third consecutive spring in which employers have tapered off their hiring, even after the Labor Department adjusted the numbers for the usual seasonal changes. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is unclear. The recent payroll tax increase or political gridlock in Washington could be to blame for the sudden slowdown, but neither seems to be showing up much in other relevant economic data.

“I’m at a bit of loss as to how to explain it,” said Paul Dales, senior United States economist at Capital Economics. “Even if this is the start of another springtime-summertime slowdown, we’re hoping it’ll be a bit more modest than it was in previous years, because the housing market is doing very well.”

The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for an unwelcome reason: more people dropped out of the labor force, rather than more got jobs.

The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working. Baby boomer retirements may account for part of the slide, but discouragement about job prospects in a mediocre economy still seems to be playing a large role, economists say.

“The drop in the participation rate has been centered on younger workers,” said Joshua Shapiro, chief economist at MFR Inc., “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”

Still, as always, economists cautioned not to draw too many conclusions from one month’s report, because the numbers will inevitably be revised.

“Remember that we’ve had a pattern of upward revisions,” said John Ryding, the chief economist at RDQ Economics, noting that the government on Friday revised January and February’s net growth upward by a total of 61,000 jobs. “Before we read too much into it, bear in mind we have at least two more cracks of the whip before the number is really finalized.”

March’s job gains were concentrated in professional and business services and health care, while the government again shed workers, as it has been doing for most of the last four years, though reductions at the Postal Service accounted for most of the latest decline. Economists expect more government layoffs in the months ahead as the effects of Congress’s across-the-board budget cuts make their way through the system.

Some policy makers have started to publicly address deficiencies in the quality of the jobs being created by the private sector, in addition to their quantity.

“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech.

Relatively low-wage sectors like food services and retail businesses have accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the downturn were in the middle range of wages, while a majority of those added during the recovery have been low-paying.

In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly one in 13 American jobs is in this industry.

Ms. Raskin also expressed concern about temporary jobs, which account for a growing share of total employment.

Usually an increase in temp hiring is considered a good thing, at least at the start of a recovery, because it indicates that employers are thinking about taking on permanent workers. So far, though, employers seem to be sticking with those temporary contracts.

“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.”

Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday.

Economists, who had expected claims to drop to 350,000, said while part of the rise reflected difficulties adjusting the data during the Easter and spring breaks, there was no doubt the pace of job growth had eased.

“What we do know is that the growth momentum has slowed, employment has slowed. The question is how much,” said Millan Mulraine, a senior economist at TD Securities.

That question will be answered on Friday when the government releases its employment report for March.

According to a Reuters survey of economists, the Labor Department is expected to report that employers added 200,000 jobs to their payrolls last month after hiring 236,000 workers in February. The unemployment rate is seen holding steady at a four-year low of 7.7 percent.

But the risks for a weaker reading are high after a report from the payroll processor ADP on Wednesday showed that private employers added the fewest jobs in five months in March.

Goldman Sachs expects the economy to have created 175,000 jobs last month, noting that the tone of labor market indicators softened in March, especially in light of the so-called government sequester, which is cutting $85 billion in spending.

“The sequester is likely to slow March payroll growth, and payrolls have outpaced broader measures of labor market improvement over the last few months,” said Sven Jari Stehn, an economist at Goldman Sachs.

Last week, the four-week moving average for new claims, considered by some economists to be a better measure of labor market trends, rose 11,250, to 354,250.

Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.

“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.”

The Labor Department reported that the economy added 236,000 jobs in February as the unemployment rate sank to 7.7 percent, down from 7.9 percent in January and the lowest level since December 2008.

Wall Street expected no more than 165,000 additional jobs in February, and the surprise helped lift the Dow Jones industrial average to another new nominal record, its fourth for the week. It closed at 14,397.07.

But many experts said if it weren’t for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead.

“It does suggest a bit more cushion heading into the spring, when we will see the bulk of the impact from the sequester and fiscal pullback,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “This was a good report. It’s hard to poke holes in it. But we think we’ll see some slowdown in April and May because of the sequester.”

Mr. Gault estimated that the economy would achieve a 1.5 percent growth rate in the first half of 2013. Without the spending cuts and a rise in Social Security taxes that went into effect in January, he said, the economy would probably advance at double that pace.

As a result, he and other economists expected that the pace of job creation would slow, leaving the unemployment rate not much lower than where it is now. If jobs were added at February’s pace for the rest of 2013, the unemployment rate would crack the closely watched 7 percent level by the end of the year. Instead, Ms. Meyer predicted that unemployment would remain near 7.5 percent.

Macroeconomic Advisers, an independent forecasting firm, predicted that the federal spending cuts would cost about 700,000 jobs this year, with most of the damage occurring in the second and third quarters.

While the economy is expected to continue to add enough jobs to keep the jobless rate from rising significantly, estimates like these suggest that without the drag from Washington the labor market might have added, on average, a robust 300,000 jobs a month or so.

The data for February, adjusted for normal seasonal variations, don’t reflect the federal cuts, which are expected to affect not just government jobs but also industries that rely on public spending.

Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.

On Friday, the White House was quick to point to the new data as a sign that the economy is strengthening even as it warned of the impact from the squeeze on spending.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

In some respects, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

Private hiring last month was broad-based, with healthy job gains in several areas, including business services and manufacturing.

The gains were broad-based, the Labor Department said Friday, with sectors ranging from manufacturing to business services turning in healthy results. Construction was especially strong, adding 48,000 jobs, a sign that the recovery in the housing market is beginning to translate into new jobs.

Public-sector employment continued to shrink, however, as the number of government employees nationwide fell by 10,000.

While many economists were encouraged by the report, some noted that the size of the labor force contracted by 130,000. Some of that was because of retirements, but some was also a result of discouraged workers giving up the search for jobs.

As a result, the labor participation rate sank to 63.5 percent, a low for the current economic cycle.

At the current rate of job creation, unemployment could actually crack the 7 percent level by the end of the year. However, economists expect the budget cuts now under way in Washington to contribute significant headwinds in the months ahead. The so-called sequester went into effect March 1.

“We think we’ll see some slowdown in April and May because of the sequester,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “We’re going to see federal job cuts and the spring is going to be a soft patch for the labor market.”

She estimated that the unemployment rate would stabilize at about 7.5 percent later this year.

The unemployment fell from 7.9 percent in January. Economists had been expecting the economy to add 165,000 jobs in February, with no movement in the rate.

After peaking at 10 percent in October 2009, the unemployment rate fell steadily for three years but has been stuck at just below 8 percent since last September.

The pace of hiring in February represented an acceleration from the previous four months, when the economy added jobs at a monthly rate of 190,000.

The budget cuts in Washington are expected to reduce federal unemployment benefits by about 10 percent. State benefits, which cover the first 26 weeks of unemployment in most states, will not be affected by the federal budget squeeze.

Dan Haney has worked occasionally since he was laid off from his job as a customer service representative two years ago, but lately the hunt for work has proved fruitless, and he is concerned about what would happen if his unemployment benefits were reduced.

“At this point, I have to take what comes down the pike,” said Mr. Haney, who is 54 and lives in Philadelphia. “I’m on the computer every day looking for jobs.”

A high school graduate, Mr. Haney has some computer training but lacks a college degree, which has made finding a job all the more difficult.

“Some of these entry-level jobs say college is preferred,” Mr. Haney said. “Why do you need a college degree to answer a phone?”

In another report, the government said consumer prices were flat for a second straight month in January, providing scope for the Federal Reserve to maintain its very accommodative monetary policy stance as it tries to stimulate the sluggish economy. Excluding food and energy, consumer prices rose 0.3 percent, the largest gain since May 2011.

The S.P. 500 index dropped 1.2 percent on Wednesday, its biggest decline since Nov. 14, after minutes from the Federal Reserve’s most recent meeting suggested the central bank may slow or stop buying bonds sooner than expected.

With the benchmark S.P. index still up 6 percent for the year, many analysts considered the Fed minutes as a trigger for an overdue pullback in equities, as would be the upcoming sequestration in Washington. The sequestration — automatic across-the-board spending cuts put in place as part of a larger congressional budget fight — is due to begin March 1 unless lawmakers agree on an alternative.

“It’s the sequester, it’s the knee-jerk reaction to yesterday’s Fed minutes and it’s the realization the consumer is slowing,” said Phil Orlando, chief equity market strategist at Federated Investors in New York. “I’d love to see a healthy 5 percent correction. Let’s wash out some of the weak hands and set up for a better move during the year.”

Wal-Mart rose 2.2 percent after the world’s largest retailer reported a larger-than-expected rise in quarterly profit and raised its dividend. Investors weighed the news of better profit against persisting weakness in sales in the United States.

The number of Americans seeking unemployment benefits jumped 20,000 last week to a seasonally adjusted 362,000, though it remained at a level consistent with modest hiring.

The Labor Department said Thursday that the four-week average, a less volatile measure, rose 8,000 to 360,750, the highest in six weeks. A department spokesman said heavy snowstorms in the Northeast did not affect the total.

Applications for unemployment benefits, a proxy for layoffs, have trended downward recently. The four-week average has declined 7.5 percent since mid-November and fell to a five-year low three weeks ago.

Still, last week’s increase put applications back in the 360,000-to-390,000 range, where they have fluctuated since early last year.

At the same time, job growth has picked up. Employers added an average of 200,000 jobs a month from November through January. That was up from about 150,000 in the previous three months.

In January, the economy added 157,000 jobs, the government said this month. And revisions showed that employers added an average of 181,000 jobs a month last year, up from an earlier estimate of 153,000.

Still, the unemployment rate ticked up to 7.9 percent from 7.8 percent in December. Economists think the rate will slowly decline if hiring continues at last year’s monthly pace of 180,000. The rate fell 0.7 percentage point in 2012.

Separately, the Labor Department said Thursday that consumer prices in the United States were flat last month, the latest sign that inflation is in check.

The Consumer Price Index has risen 1.6 percent in the 12 months ending in January. That’s down from a 2.9 percent pace a year ago.

Inflation slowed dramatically last year. Consumer prices rose only 1.7 percent in 2012, down from 3 percent in 2011. Low inflation leaves consumers with more money to spend, which benefits the economy.

In addition, the National Association of Realtors said Thursday that sales rose 0.4 percent in January compared with December, to a seasonally adjusted annual rate of 4.92 million.

That was the second-highest sales pace since November 2009, when a temporary home-buyer tax credit caused purchases to spike. The median price for a home sold in January was $173,600, an increase of 12.3 percent from a year ago.

Analysts say purchases would be higher if more homes were available. The supply of homes for sale dropped to nearly an eight-year low in January.

The Dow had been rising steadily for about a month. With auto sales strong and optimism about the jobs market high, the index was only 155 points away from its highest nominal close.

“There’s a newfound enthusiasm for the equity market,” said Jim Russell, regional investment director at U.S. Bank Wealth Management in Minneapolis.

The Dow ended Friday 149.21 points higher, at 14,009.79. The Standard Poor’s 500-stock index rose 15.06 to 1,513.17, and the Nasdaq composite index was up 36.97, to 3,179.10.

Auto sales helped. Toyota, Ford, General Motors and Chrysler all reported double-digit gains for January. The government jobs report that was released Friday was mixed, but traders seemed to focus on the positive.

The Labor Department said 157,000 jobs were added in January, which was in line with expectations. Unemployment inched up to 7.9 percent from 7.8 percent in December, but many economists were encouraged because the government now says that hiring over the last year was higher than originally thought.

The jobs number is based on a survey of employers, and the unemployment rate is based on a separate survey of households, which is why they can diverge.

Market watchers were divided over what the potential for a new high really meant for the Dow. To some, it was a reason for optimism.

Those investors had been shying away from stocks. Since April 2011, investors have pulled more cash out of stock mutual funds than they have put in, according to the Investment Company Institute, a trade association. In the last three weeks, though, that trend has reversed, which could make January the first month in nearly two years when stock-focused funds had more money flowing in than flowing out.

To others, 14,000 was nothing but a number, and not even the best number on the board. Professional investors usually pay more heed to the S. P. 500.

Joe Gordon, managing partner at Gordon Asset Management in Durham, N.C., says he does not think the gains will last. The fact that small investors are piling back in, he said, is a sign that the market has attracted too much optimism and is headed for a fall.

After the Dow hit its high in 2007, it fell almost steadily for the next year and a half, losing more than half its value before starting to tick back up.